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Legislative Update

Week Ending May 4, 2007

• Eastern Pa Working Together Conference Scheduled
• CPA Mobility Legislation Introduced
• Revenue Proposes PIT Rulemaking
• EMST Reforms on the Move…Again!
• Wiessmann Confirmed as State Treasurer
• Committee Approves House “Blues Merger” Bill
• Banks Treatment of “Goodwill” Focus of Hearing
• Revenue Department Releases April Collections

Eastern Pa Working Together Conference Scheduled

A Working Together Conference for eastern Pennsylvania is scheduled for Wednesday, May 23, 2007, at Philadelphia University. The Working Together Conference is a joint effort made by PICPA, the IRS and the Pennsylvania Department of Revenue to provide a forum for discussion of topical issues in tax administration. Representatives from the IRS Taxpayer Advocate Office will be available throughout the day for consultation and to assist in case resolution. Register early!

CPA Mobility Legislation Introduced

Sen. Jake Corman has introduced legislation, with the support of PICPA, that will greatly enhance the practice mobility of Pennsylvania CPAs. He is joined on the bill by 23 of his colleagues, including PICPA member Sen. Pat Browne and Democratic Floor Leader Sen. Robert Mellow.

Senate Bill 838 is based on provisions of the Uniform Accountancy Act, a model licensing law prepared jointly by the National Association of State Boards of Accountancy, the state agencies responsible for regulating the accounting profession, and the AICPA. Similar legislation was recently signed into law in Tennessee and is actively pending in several other states.

The bill would add a concept called “substantial equivalency” to the CPA Law. This new section is designed to enhance the mobility and portability of the CPA license across state lines, the ease of which having become critical as more individuals and businesses are increasingly in need of CPAs who can conduct business in multiple states, unfettered by parochial state regulations.

The bill proposes other changes to the law:

• Requiring that a person complete at least 150 semester hours of post-secondary education before receiving a CPA certificate, beginning in 2012.
• Eliminating the current two-tiered structure on experience requirements, setting a one year of experience requirement for all CPA candidates, beginning in 2012.
• Requiring experience of internal auditors qualifies only if the internal auditor reports to an independent board or similar body responsible for oversight of the financial reporting process.
• Allowing up to 49 percent of a CPA firm to be owned by non-CPAs.
• Updating peer review terminology to reflect changes in the AICPA Peer Review Program.

The Pennsylvania CPA Law was last amended in 1996. The bill is now pending in the Senate Committee on Consumer Protection and Professional Licensure.

Revenue Proposes PIT Rulemaking

The state Department of Revenue has proposed amendments to its rule governing Personal Income Tax returns. PICPA Committee on State Taxation is currently reviewing the draft proposed rulemaking and will be providing comments.

Specifically, the proposal sets forth the department’s policy on the form of return taxpayers are required to submit for PA Personal Income Tax and provides instructions for taxpayers regarding reporting requirements.

The rulemaking also adds a new section, “Consistent positions,” that provides that taxpayers must take consistent positions with respect to the facts asserted in a prior taxable year. For example, a taxpayer may not treat the receipt of cash as a loan while the statute of limitations is open and declare it to be a dividend once the statute expires.

Members with an interest in this rulemaking should contact the PICPA Government Relations Team for more information.

EMST Reforms on the Move… Again!

Legislation amending the 2004 Emergency and Municipal Services Tax (EMST) Act was approved by the House Finance Committee this week. A similar bill last session batted back-and-forth between committees in the House and Senate only to be vetoed by Gov. Ed Rendell.

Senate Bill 218, as passed by the Senate in February 2007, renames the EMST the Local Services Tax (LST), requires school districts and municipalities that levy the LST in excess of $10 to exempt taxpayers whose total income from “all earned income and net profits” is less than $12,000 from the tax, requires a school district or municipality that levies the LST at a combined rate exceeding $10 to have employers withhold the tax on a pro rated basis, and provides that no taxpayer is to be subject to the LST by more than one jurisdiction during the same payroll period.  

The Finance Committee adopted three amendments to the legislation.

The first amendment provides for an upfront exemption to the tax. The $12,000 threshold would apply to all earned income and net profits generated within the political subdivision which is levying the LST. If an exempted taxpayer exceeds the $12,000 threshold during the year, he or she becomes liable for an immediate lump sum withholding of the amount which would have been collected up to that point were it not for the taxpayer's previous exemption status. Finally, the amendment would require employers to remit local services tax receipts 30 days following the end of each quarter.

A second amendment adopted by the committee mandates municipalities to use at least 25 percent of the revenue derived from the local services tax for emergency services which include: police, fire and emergency medical services.

The last amendment adopted by the committee repeals the authorization for third class cities with a population between 106,000 and 107,000 according to the 2000 federal decennial census to levy an amusement tax.

Senate Bill 218, as amended, now goes to the full House for consideration.

Wiessmann Confirmed as Pennsylvania State Treasurer

The State Senate on Monday unanimously confirmed Robin Wiessmann to serve as State Treasurer for the rest of the term of former Treasurer Robert P. Casey, Jr., who was elected to the U.S. Senate last fall. 

Prior to her confirmation, Wiessmann was a director with Merrill Lynch and served as the director of Vantagepoint Funds. Since 2003, Wiessmann has served as Vice Chairman of the Delaware River Joint Toll Bridge Commission. 

Wiessmann was a founding principal and president of Artemis Capital Group, the leading women-owned investment banking firm in the United States. In 1999, the National Women Executives in State Government Association awarded her the "Breaking the Glass Ceiling Award."

Committee Approves House “Blues Merger” Bill

Gov. Rendell’s veto threat notwithstanding, a State Senate committee this week amended and reported a bill giving oversight powers to the state in cases involving the mergers of non-profit health care insurance companies such as the pending deal between Independence Blue Cross and Highmark.

House Bill 112 preserves the Attorney General’s authority regarding oversight of charitable organizations and enforcement of federal antitrust laws and establishes a restructuring board empowered to review and provide written recommendations to the Insurance Commissioner. It also states that the Insurance Commissioner may not approve the consolidation of a Blue Cross/Blue Shield plan without the prior written recommendation of the board.

On Wednesday, the Senate Banking and Insurance Committee adopted an amendment that made the following changes:

• Added the Auditor General or his designee as a board member, increasing the board membership to nine.
• Specifically required that the Governor’s appointee must be a member of the general public who is a policy holder of a hospital plan corporation or professional health services plan corporation.
• Required a vote of 7 members to approve a recommendation or determination that the merger is in the public interest.
• Required the Insurance Department make a determination that the merger is in the public’s interest, and required approval of that determination by the board, and
• Included a retroactivity clause wherein the act shall not apply to any merger, consolidation or other acquisition of control made or consummated prior to January 1, 2007.

The bill now goes to the full Senate for a vote.

Banks Treatment of “Goodwill” Focus of Hearing

The House Finance Committee held an informational public hearing Wednesday on the treatment of goodwill following a business combination of financial institutions. The Department of Revenue provided testimony.

A draft legislative proposal under consideration by the committee, but not yet introduced, would permit banks to exclude goodwill resulting from a combination from the bank shares tax. Specifically, it would allow a deduction for goodwill recorded as a result of the use of purchase accounting for an acquisition or combination from the value of shares reported on tax returns due on or after January 1, 2008. Only institutions with combinations occurring after June 30, 2001 may disregard this goodwill in their value of shares.

The department expressed concern that the proposal would create administrative and verification problems. The proposal may also violate the uniformity clause of the Pennsylvania Constitution because it allows some institutions to remove goodwill from the tax base, according to the department.

Revenue Department Releases April Collections

Secretary of Revenue Thomas Wolf reported on May 1 that the state collected $3.4 billion in General Fund revenue in April, which was $42.7 million, or 1.2 percent, less than anticipated. Fiscal year-to-date General Fund collections total $22.8 billion, which is $207.8 million, or 0.9 percent, above estimate.

The Gaming Fund received $26.6 million in unrestricted revenues for April. Fiscal year-to-date collections for the fund total $397.7 million. Gaming Fund receipts include taxes, fees and interest. Of the total for the month, $25 million was collected in state taxes for property tax relief, bringing the year-to-date total to $93.4 million.